SOCIAL-STATUS, EDUCATION, AND GROWTH

This paper investigates the implications of social rewards on the allo cation of talent in society and consequently on the process of economi c growth. We consider two sources of heterogeneity among workers: nonw age income and innate ability. A greater emphasis on status may induce the ''wrong'' individuals, that is, those with low ability and high w ealth, to acquire schooling, causing workers with high ability and low wealth to leave the growth-enhancing industries. This crowding-out ef fect, taken alone, discourages growth. Growth may be enhanced by a mor e egalitarian distribution of wealth, which reduces the demand for sta tus.